Oregon Council for Knowledge and Economic Development

Council Minutes

     November 18, 2002

The meeting convened at 1:15 PM. Vice Chancellor Vines called roll and Chair Allen Alley introduced the new members to the Council. Keith Larson of Intel Capital was the newest voting member. Prior to coming to his position at Intel, he had served as a  venture capital consultant for companies in the Northwest. Chair Alley then introduced two new technical advisors, Mike Salsgiver of the Portland Business Alliance and Harvey Matthews of Associated Oregon Industries (AOI). Mr. Salsgiver was not able to attend, but Mr. Matthews introduced himself as AOI’s education and technology lobbyist. Most recently he also worked with the Speaker of the House for the last two sessions of the Oregon Legislature.

Chair Alley then moved on to approve the minutes. After hearing no comments, he asked for a motion to approve. Dwight Sangrey moved to approve, Rep. Al King seconded, and the minutes were approved unanimously.

Overview of Key Messages and Framework

Chair Alley then moved on to the overview of key messages and framework regarding the Council’s final report. He commended the committees and committee chairs for the hard work over 2002 and noted that today’s meeting would be important in securing consensus and honing a message that everyone would use to “shop” the recommendations to various organizations and interested parties. The first debut of Council recommendations would happen on December 9^th as part of the Oregon Business Council’s Leadership Summit, and following from that materials would be developed so the Council members and supporters could make presentations individually.

Committee Reports

With these general comments, Chair Alley asked for the Technology Transfer/Research & Development Chair Jim Johnson to report on the work of his committee. Mr. Johnson gave a brief overview of the committee’s objective and then moved on to their priority recommendations. The top priority was to establish a Signature Research Area for Oregon. The total budget request for this piece would be 30 million dollars, with 10 million for investment and 20 million in capital, along with an additional 200k for continuing research. The committee had quickly produced a recommended area of focus; multiscale materials and devices, which would be elaborated upon later. While the committee was recommending that investigation into potential areas continue in the form of a state technology roadmap/database, Mr. Johnson noted the critical time frame with regard to the state legislative session and was asking the Council to recommend the committee’s chosen area at the outset, which was based on a preliminary look at state research expenditures, line of sigh to existing industry, and opportunities for federal funding.

At this point, Mr. Johnson deferred to Skip Rung, who had done much of the initial work to identify the signature area. Mr. Rung introduced himself as the former research director for Hewlett-Packard, now a consultant and volunteer for Oregon’s economic development activities. He presented the Council with a more detailed description of Multiscale Materials and Devices (MMD), as proposed to a subcommittee. The field involves the integration of small materials such as atoms and other nanomaterials integrated into micro-scale structures, resulting in products shrunk in scale and size for speed and efficiency. This would be beneficial to a number of energy-related, chemical, and biological processes, indicating a sizeable market potential. Examples of projects currently receiving federal funding include heating and cooling systems in clean biohazard suits, fuel cell systems, cell-based biosensors, and micro-reactors for water and waste remediation. Mr. Rung went on to note that Oregon is in a unique position to corner the market on this area of research due to active programs at virtually all the major OUS research universities and OHSU. He also noted a great willingness to engage in collaboration among the campuses. He believed that with assistance from the initial investment as a Signature Research Area, it could be quite successful at leveraging funds from the federal government. Mr. Rung concluded his presentation by displaying a variety of sample devices that demonstrated the wide variety of applications, while discussing in further detail the addressable markets and calculations used in the study. As the devices were passed around the room, Mr. Rung welcomed questions from the Council.

Chair Alley commended the committee on looking at core competencies to come up with a recommendation and he noted the importance of communicating the package succinctly. Marketing was key. Scott Gibson made some comments on behalf of OHSU noting that the university was supportive and interested in seeing through the rest of the process more actively. Bill Newman asked if this was a draft recommendation or a final. Mr. Johnson responded that the committee was recommending the Council include it as a priority recommendation for immediate development. Chair Alley reminded the Council that at the last meeting the committee had been charged with coming up with something specific using a short time frame with as rigorous a selection process as was possible, rather than taking two years to go through the search/refinement process. He noted that it would not  be the only area Oregon would develop in the future, but garnering momentum was critical in light of the upcoming Legislative session. He recommended its approval.

Mr. Sangrey asked about the selection process and some of the other areas that were considered. Mr. Johnson responded that the committee looked at a statewide patent database to determine core competencies, and Mr. Rung went through each of them in detail to the committee before this area was agreed upon unanimously as being the most likely candidate. Ann Bunnenberg noted that what was persuasive for her as a member of the committee was that this proposal had more potential for applications across multiple sectors than the others did. She felt that potential economic power would make it most palatable with government and industry. Frost Lee added that not only was there a critical mass in this area, but a shorter timeline for potential success and job creation than other things on the list.

Mr. Gibson asked if this supported existing clusters of industrial strength in Oregon. Mr. Johnson noted that there was already a million dollars of industry investment in research. Mr. Rung added that his former employer HP was working with these things right now. Mr. Johnson continued that there were a lot industries working with these things right now, so they would be supportive of this initiative. Representative Tom Butler asked how this research in the area had not been previously funded and who currently owns the intellectual property. He also added that the committee should continue to work on refining numbers for budgetary purposes. Mr. Rung replied that funding had come from a variety of sources, mostly federal and that property rights were usually attributed in those instances to the universities in compliance with Bayh-Dole. In the case of corporate funding, there was usually an agreement between the university and the company. Rep. Butler then asked about estimated future costs. Mr. Johnson replied that the state would be “seeding” this project, providing for buildings and equipment that would allow additional leverage to pursue federal grants.

Mr. Johnson moved on to additional recommendations. The second recommendation was to increase the commercialization of ideas in the state, focusing on both higher education and economic development. This included faculty inventive programs, protection of the Bayh-Dole Act, altering mission statements of state agencies to be focused in this areas, development of technology roadmaps and databases and the formulation of nationally competitive technology transfer policies. Mr. Johnson noted that the alteration of the mission statements was already underway, thanks to Chancellor Richard Jarvis and OECDD Director Katy Coba. The third recommendation was to adequately fund public technology transfer efforts. The third recommendation was to adequately fund public technology transfer efforts. He noted here an idea taken from the Washington Technology Center, focusing on transferring technology to rural Oregon and traditional industries. The total cost of the committee recommendations would be about $35 million dollars.

Chair Alley thanked Mr. Johnson and the committee and moved on to the Capital and Business formation committee. Committee chair Scott Gibson introduced the group by highlighting goals and objectives, and moved on to the priority recommendations. The first was to build a venture capital “industry cluster” and to attract VC’s to Oregon. Elements of this recommendation included coordination with existing foundations in the state to leverage part of their existing asset allocation of their corpus to private equity venture capital. Then these interests would put pressure on firms to move an existing partner for lifestyle reasons to Portland, where they would work part-time on Portland investments and part-time on out-of-state investments. Another was a reduction of capital gains tax to stimulate entrepreneurship both in the state and out as an attraction to relocate. Mr. Gibson credited Rep. Butler with this idea. The second primary area considered attracting management and entrepreneurial talent to Oregon through an incentive package that included tax credits extended to a very selective group meeting very highly defined criteria, with required certification through OECDD> Those under consideration would have to have access to $100 million worth of capital and wbe willing to invest at least two million in Oregon companies.  The idea would be that it would be revenue-neutral, in that two million of new capital would come to Oregon, but no new income tax. Mr. Gibson noted that this would be controversial and that there were people in the high tech industry themselves who didn’t agree with this. The majority on the committee, however, agreed that this idea was worth recommending. Other recommendations included incentive packages for SRA researchers for the finest signature research center professionals, to support the attraction of world-class researchers, and training programs for developing qualified CEO’s. He noted that in Seattle and San Francisco the genesis of many lucrative industry clusters was the presence of 3-5 high quality researchers.

Chair Alley thanked Mr. Gibson for his presentation and asked if there were any comments or questions. Hearing none, he noted that ideas were the most critical in a knowledge economy, and that the old structure to attract companies doesn’t work with companies are created by ideas, which were created by individuals.  He hoped this suite of recommendations would be key to changing that old structure. Mr. Gibson noted that he presented this at an Intel conference and an Oregon venture capitalist who would probably qualify under the proposed criteria that he would have been interested in coming to testify in support of this, but only if there was some way to be exempted.

Representative King noted that the concept had a trial run in the Legislature during the special session and he experienced some resistance in his caucus among people who misunderstood the revenue-neutral element of the proposal.  Being able to anticipate that reluctance as well as having the Governor of the Council’s side was critical. Senator Ryan Deckert brought up the Strategic Investment Model used in Oregon previously as a good parallel concept. The idea is to focus on the investment that will be generated. Rep. King, added that the lead-on should be focused on how this will attract money and jobs to get favorable attention at the outset. Rep. Butler noted the difficulty here as opposed to the SIM program was that the latter was lined up around known quantifiable amounts  and upper limits, which are hard to come by when you’re speaking of individuals. It was important to move away from artificial limits in this context Chair Alley noted that this was more like venture capital, not bringing 10,000 employees but the potential to employ that, instead of a portfolio of companies, we have a portfolio of people, including venture capitalists and researchers. Mr. Gibson noted that the next step was identifying marketing strategies and key legislators who would support this. Mr. Alley noted thatt committee chairs needed to lead groups as well. Even if not everyone agreed, the idea of “disagree and commit” was an important mantra to adhere to in order for the proposal to succeed.

Chair Alley thanked Mr. Gibson and then asked Jill Kirk to present recommendations from the Knowledge Workforce Committee. Ms. Kirk noted that her committee’s charge was to make sure Oregon is a state that has people at all levels of readiness to take up and produce the great ideas that researchers and venture capitalists have come up with. In the interests of time, she focused her presentation only on the significant changes made to the group’s primary recommendations since the last Council meeting. The committee’s three recommendations attempted to serve the three sets of workforce population—current workforce, university/college students, and those in the K-12 pipeline—illustrating the broad mission of the committee. The first recommendation addressed critical gaps and opportunities in the current workforce, the second addressed growing a quality workforce by supporting ETIC engineering recommendations and enhancing and easing business management and IT degrees and transfer capability, and the third sought to inspire students and teachers at the k-12 level to have a more enhanced and meaningful curriculum in science and technology fields.

Chair Alley thanked her for her comments and asked if there were questions or comments. He observed that he went back and looked at the charter of the committee, because he wasn’t sure if these recommendations were completely germane to the charger and noted that the last six words were focused on training incumbent workers. Carl Talton noted that talk about workforce and jobs in such an exclusive context diminishes the idea that we must also be developing entrepreneurial and management skills, not just job-ready skills. Chair Alley agreed, and cited Intel’s scholarship program as a good example of efforts to provide Oregon’s best and brightest the incentive to stay in the state. Ms. Kirk noted that in the longer section of the report  the committee identified programs currently working to do this and encouraged continuation and growth of those initiatives. Keith Larson talked about ability to make things grow within Oregon and noted with such high growth of technology overseas as well as across the country many companies were moving their development to places like India and China. It was important that workers and managers are trained to work in a complementary, not competitive fashion with overseas workers.

Pat Scruggs added that in the recommendation regarding incumbent workers was the technology “roadmap” for Oregon workers designed to complement the roadmap being recommended by the Tech Transfer committee. She noted Oregon is one of the few states without a stateside workforce strategy for knowledge-based workers and this was necessary to understanding the dynamics of the labor market. Ms. Lee noted that one of the important elements of all the committees is that their recommendations build on what exists already. She encouraged the committee to develop this as well, and noted that while many intuitively think of the Pacific Rim, Oregon has traditional ties with other parts of the world as well, such as Germany through the timber industry. This focus also brought up the need for foreign language competency. Mr. Gibson asked if there was any thought to additional prioritization considering the likelihood not all recommendations would be funded. Ms. Kirk responded that the committee did prioritize the roadmap as the most important, since it was so critical and needed in Oregon. Ms. Scruggs added that the committees had taken 40 issues from various committees and narrowed them down to the 8 interrelated ones presented. Whether they were presented as a uniform package or a group of things to choose from was the Council’s decision. With this the group turned to a discussion of funding and final approval for the recommendations.

Vice Chancellor Vines reminded the group that the $40 million of their $76 million was already part of the ETIC budget and $5 million was coming from OECDD, so the Council didn’t have to worry about being primary advocates for those elements of the recommendations. Mr. Johnson noted that if the Council couldn’t convince the Governor and public that a $76 million dollar investment in a $12 billion dollar budget was necessary it doesn’t matter because the idea of realigning priorities will not have gotten through. “We need to make the decision, even though times are hard, if we stick with the old they’re going to continue to struggle.” Mr. Sangrey believed that there was a very important element of funding strategy that comes from leveraging from other sources, especially federal sources. In his view, it was clear Oregon didn’t have the clout it once did but there was a federal delegation with some seniority and representatives who were expecting the business community to come to them with good ideas and to ask for their help in leverage. He advocated for more coordination in crafting a federal strategy. Mr. Gibson asked what the appropriations bills would be coming up that might give the Council a near term opportunity. Rep. King noted that it wasn’t critical this early on, but that it was important to keep communication lines open with the federal delegation. Mr. Johnson encouraged people to appear at the OBC Summit and say specificially what the federal representatives can do to support their offices. Chair Alley encouraged the Council to be paying attention to alternate funding sources, and asked venture folks to look for relevant matching funds. Gordon Hoffman noted that it was important to focus on regional initiatives such as the Northwest Energy Collaboration, which PNNL was a part of. Regional initiatives were critical to being noticed on federal radar.

Recommendation to Continue OCKED

Chair Alley then moved on to the next agenda item, which included a recommendation to continue the Council. He called upon Vice Chancellor Vines to elaborate on this. Vice Chancellor Vines noted that the Council needed to recommend whether it should sunset in 2006 or whether it should continue. Chair Alley asked if it was biennial noting there would be another session before the sunset date. Vice Chancellor Vines responded that despite this, the legislation was written so that the recommendation must be made at the end of the Council’s first year. Rep. Butler pointed out the upcoming session would be a good indicator of the Council’s effectiveness. Chair Alley responded that this was true, but the administrative issue was that a decision needed to be reached before this could be made clear. “Today is the day we approve our report, and embedded in that report is a binary recommendation as to whether we continue or whether we don’t. ” He recommended that based on the data that the Council extend its sunset date. Rep. Butler asked whether this meant extending the sunset by two years. Vice Chancellor said that there was a possibility that the Council could ask the Legislature to eliminate the sunset provision altogether. Rep. Butler moved that with the information provided, the Council recommend to extend the sunset date by two years. Mr. Sangrey seconded. Mr. Gibson asked if the Council would consider if there would be permanent infrastructure created, this should be affirmed into departments so that the process lives on even if the Council does not. Chair Alley noted that following the session the Council could revise its position but until then it would be wisest to extend its existence. The vote for extending the sunset clause was unanimous. 

At this point, Mr. Johnson noted that at some point there needed to be an attempt to strategically state where this Council should be placed, and have a discussion involving permanent placement. Mr. Gibson noted that during a meeting with the Chancellor and Katy Coba, the interim director or OECDD, she recommended they develop a white paper in support of this proposal. Chair Alley noted that volunteer support was very important and extended credibility and value to recommendations, and permanent staff was needed to ensure support of the infrastructure to enhance the work of the volunteers. Mr. Johnson noted that if the Council wanted OUS and OECDD to do this, they needed to know soon so they could get it funded. Jim Coonan noted that meetings were going to be taking place to discuss this. Vice Chancellor Vines noted that the departments were already funding facilitation and meeting expenses out of pocket and so it would be wonderful to have some dedicated funding to relieve agencies’ budgets.

Approval of Final Report

Chair Alley then asked the group to approve the final report for distribution and presentation to the Governor. Rep. King asked clarification on whether all three of the reports were ready. Vice Chancellor Vines responded that the content of the material was entirely ready. Rep. Kind asked that they approve and have the staff do the necessary edits and cosmetic changes so it could be prepared in time for the start of the session. Representative Butler moved for approval. Mr. Johnson seconded and the motion approved unanimously.

Report from Legislative Strategy Committee

Senator Deckert was called upon to present an update from the Legislative Strategy Committee, where the appropriate recommendations would be prepared to be drafted into legislation. He handed out a table of all possible bills, including funding for the extended Council for the group’s review. He noted that more work would be continuing next Thursday now that the recommendations had been approved for final presentation. Chair Alley asked for comment. Sen. Deckert added that a group worked on something similar to this regarding e-commerce enterprise zones that was very successful and had created 700 jobs in rural Oregon. Vice Chancellor Vines thanked the committee and all the volunteers who had gotten such a great head start on this effort. Mr. Gibson asked the committee for some kind of timeline for the legislative process, along with lists of the party leadership that could be supportive of the initiatives with their caucuses. Chair Alley noted that Pat Allen and Chris Bright had started working on this. Doris Penwell of OECDD has been spearheading these efforts and would be able to assist as well.

Update on Outreach Efforts

Chris Bright from Pixelworks and Ken Ray from Fleischman Hillard introduced themselves as the point people working on public awareness strategies for the Council recommendations and report. Mr. Ray handed out bullet points of the strategy for public awareness. Initial strategies included working with people at the table and others to obtain endorsements for the approved report, building public consensus and infecting ideas among public opinion leaders and public, eventually moving up to the Legislature. Mr. Ray explained they were developing a “30 second pitch” discussing key themes and issues with the overarching message that these proposals will lead to high quality, high paying jobs. He went through a vigorous timeline for the coming weeks including a press release to go out quickly, followed by media interview with Chair Alley and committee chairs to talk about proposals and to work with staff members in the legislative offices, Governor’s with the goal being to meeting with as many editorial boards as possible before the release of the next revenue forecast. Other potential opportunities for key Council members to talk about long term investment would continue until the December OBC Leadership Summit, when they would be working the OBC staff to make OCKED’s recommendation a key point of the event’s message.

At this point, Dr.Lura Powell of PNNL noted her experience in rural Washington State and the importance of focusing a message that was inclusive of both Eastern and Western parts of the state. Senator Deckert asked if press conferences had been considered. Mr. Ray noted that these had been considered, but reporters seemed to prefer one-on-one contact and that it was important at this point to address the print medium since the message of the Council was pretty complex. Senator Tom Hartung commented that when launching such an initiative it is good to note all the strengths in Oregon, including traditional industries. Representative Butler added that in the rural Oregon now recognized that state of the economy and in that process came to the conclusion that it would do whatever it would take to get Oregon in its feet, even if effects were not immediate. Chair Alley noted it was message that was so important, and that both political parties had to step to the middle of the issue. Mr. Johnson noted that legislative leadership be included in pre-work, and recommended getting a list of parties and representatives to talk and commit to before December 9^th.

Items from Members

Jim Johnson requested that Peggy Miller from the New Economy Coalition give a presentation on cluster studies summarize what was done. Ms. Miller distributed her presentation while noting she considered the study a next step to what the Council had done. The study arose from the need to see if there was an economic development opportunity coming out of industry clusters. It looked at Stanford SRI studies and other work and did preliminary assessment of cluster study of Oregon. It was not considered a definitive report, but rather drawing out distinct areas that can be developed. Lessons learned noted that it was important to focus on strengths, binging in companies from out of state to complement current areas of strength. Clusters are not just one big company but many small ones that come together and grow an eco-system of service providers and capital sources. Challenges include motivating government to create business friendly development and industry clusters, tying universities more closely with research, and encouraging private business to step to the fore to invest. Ultimately, investment in clusters has been a proven investment strategy and answers the questions of how to retain high tech businesses if they are acquired.

Ann Bunnenberg then spoke for a few moments about the Oregon Bioscience Association report about to be released in December. As a representative of OBA, she thought it would be useful for the Council to have a preview. The report tried to take an empirical point of view on survey research with existing bioscience industry. It identified a “universe” of 200-250 companies in Oregon that fit that criteria, with some interesting results. One of the most interesting was that the medical device sector is the largest subset of bioscience companies, comprising 28% of companies, but almost a third of jobs and almost half of revenue. That sector is tri-county centric, although there are players outside that area. The chemicals and re-agents subset was also quite big, about 28% as well, asn was rurally focused, with clusters in Albany, Eugene, and Bend. The other point of interest was that the most companies were about eight years old, the time when companies in that sector begin to show significant growth. She noted that while the report had not been finalized, she was happy to provide interim results to Council members if they thought it would be of use to them.

Dr. Powell noted that it was important to look beyond Oregon when examining clusters like bioscience. Region cooperation was very important in this area, such as the proposed regional center for biodefense, funded with the help of the NIH. Ms. Bunnenberg concurred that it was important to collaborate, everyone was more competitive when working in collaboration as a region.

Report on Technology Roadmap/Database

Chair Alley then asked Vice Chancellor Vines to discuss the creation of the technology roadmap coming out of the Technology Transfer Committee. She explained that the recommendation for the signature research center was gleaned from multiple sources and processes. This would be an attempt to objectify that process, looking at the clusters of research strengths around the state, identifying researchers, based on patent applications, journal articles, grant applications and other factors to determine the next potential areas for development. OECDD has committed $50,000 for this and will hopefully be matched by another source. She noted that the City of Portland might be supportive. Senator Deckert asked if there was anything else to do structurally regarding this work. Vice Chancellor Vines noted that proposed changes in mission statement, legal review, and other issues remaining that would help researchers, but those are part of secondary initiatives, which is being supported by Chancellor’s Office and others. Dr. Powell added that it would be worthwhile at looking at university systems that have done it right, with lots of productivity and spin-out companies, and looking at best practices. Vice Chancellor Vines noted that the Oregon Technology Transfer Committee has been helpful in looking at policies, procedures, and practices that can enhance or block commercialization efforts.

Planning for the Next Meeting

Chair Alley then asked the Council to consider the proposed schedule for 2003 of February 12, May 21, September 10, and November 21 as tentative dates. He then thanked the Council, committees and staff for all their hard work. The meeting was adjourned at 3:50 PM.

Oregon Department of Community Colleges and Workforce Development